Attention: TDR Forum Junkies 
I saw this article in the Wall Street Journal and thought it might interest some of you.
Christopher
Tight Supplies Keep Diesel Prices Up
By THADDEUS HERRICK
While gasoline supplies are bouncing back after the disruptions of a busy hurri¬cane season, diesel fuel is showing less resilience.
The cost of diesel has eased in recent weeks, but U. S. diesel prices still remain significantly higher than gasoline prices as refiners struggle to meet global de¬mand for the fuel after hurricanes Ka-trina and Rita. The average U. S. retail price for diesel is $2. 51 a gallon, 40 cents higher than a year ago, and 31 cents higher than the average price of regular unleaded gasoline.
Because U. S. refiners are geared to make more gasoline than diesel, and with strong demand in Europe and Asia constraining exports of diesel to the U. S. , "The industry is less flexible," in ramp¬ing up its diesel supplies, says Larry Goldstein, president of the Petroleum In¬dustry Research Foundation.
The approach of winter in the north¬ern hemisphere is keeping additional pressure on the price of diesel. Diesel is a distilled fuel like heating oil, and so its prices often move in sync with that popu¬lar winter fuel. New York Mercantile Ex¬change heating-oil prices are down 23% from a high of $2. 20 a gallon on Sept. 1, but are up 16% over a year earlier. The Department of Energy reported that distillate supplies rose by 1. 1 million barrels for the week ended Nov. 18, but they remain at the lower end of the average range for this time of year.
So while U. S. drivers have welcomed declining gasoline prices, diesel-consuming industries aren't getting much relief. The nation's trucking industry, whose fleet runs on diesel, is having difficulty passing its extra costs along to customers. FedEx Corp. , for example, adjusts its surcharges once a month, but it can take as long as six weeks after fuel prices rise for the company to start recovering the increases from customers.
Hurricanes Katrina and Rita ripped through key Gulf Coast refining centers in August and September, shutting down 20 plants at one point and a total of 4. 8 million barrels of production a day, or 28% of U. S. refining capacity. Production has resumed slowly, though three refiner¬ies, accounting for about 5% of refining capacity, are still offline.
The storms hit at a time when global refining capacity already was tight and increasing energy demand, especially from China and India, was driving up prices of products derived from crude oil, such as gasoline and heating oil.
U. S. refiners responded to soaring gasoline prices, churning out gasoline at unprecedented rates. But in part because refineries here are configured to make more gasoline, they made diesel less of a priority. "Refiners maximized gasoline production," says Mary Rose Brown, a spokeswoman for Valero Energy Corp. , the nation's largest refiner.
As a result, U. S. retail diesel prices soared to a high of $3. 16 a gallon for the week ending Oct. 24, weeks after the storms hit, even while gasoline was fall¬ing from a high of $3. 07 for the week ending Sept. 5.
There isn't much help coming from overseas. European refiners also are struggling to make more diesel fuel, be¬cause Europe uses more diesel than it produces. So while gasoline imports surged to 1. 54 million barrels a day dur¬ing the week ending Oct. 14, more than 50% higher than normal, imports of low-sulfur diesel have shown little growth.
Diesel demand is high in Europe in part because automobiles there increas¬ingly run on the fuel. In China, demand has been high because electric-power shortages led manufacturers to run their plants on diesel-powered generators. Even in the U. S. , demand for diesel is rising faster than demand for gasoline. Analysts say such trends could be par¬ticularly troublesome next year, when U. S. environmental regulations requiring lower sulfur content in diesel could fur¬ther crimp supplies. U. S. refiners fear that the new low-sulphur diesel could be contaminated by sulphur residue in the pipelines during transport, potentially forcing them to re-refine the fuel.
Christopher
Tight Supplies Keep Diesel Prices Up
By THADDEUS HERRICK
While gasoline supplies are bouncing back after the disruptions of a busy hurri¬cane season, diesel fuel is showing less resilience.
The cost of diesel has eased in recent weeks, but U. S. diesel prices still remain significantly higher than gasoline prices as refiners struggle to meet global de¬mand for the fuel after hurricanes Ka-trina and Rita. The average U. S. retail price for diesel is $2. 51 a gallon, 40 cents higher than a year ago, and 31 cents higher than the average price of regular unleaded gasoline.
Because U. S. refiners are geared to make more gasoline than diesel, and with strong demand in Europe and Asia constraining exports of diesel to the U. S. , "The industry is less flexible," in ramp¬ing up its diesel supplies, says Larry Goldstein, president of the Petroleum In¬dustry Research Foundation.
The approach of winter in the north¬ern hemisphere is keeping additional pressure on the price of diesel. Diesel is a distilled fuel like heating oil, and so its prices often move in sync with that popu¬lar winter fuel. New York Mercantile Ex¬change heating-oil prices are down 23% from a high of $2. 20 a gallon on Sept. 1, but are up 16% over a year earlier. The Department of Energy reported that distillate supplies rose by 1. 1 million barrels for the week ended Nov. 18, but they remain at the lower end of the average range for this time of year.
So while U. S. drivers have welcomed declining gasoline prices, diesel-consuming industries aren't getting much relief. The nation's trucking industry, whose fleet runs on diesel, is having difficulty passing its extra costs along to customers. FedEx Corp. , for example, adjusts its surcharges once a month, but it can take as long as six weeks after fuel prices rise for the company to start recovering the increases from customers.
Hurricanes Katrina and Rita ripped through key Gulf Coast refining centers in August and September, shutting down 20 plants at one point and a total of 4. 8 million barrels of production a day, or 28% of U. S. refining capacity. Production has resumed slowly, though three refiner¬ies, accounting for about 5% of refining capacity, are still offline.
The storms hit at a time when global refining capacity already was tight and increasing energy demand, especially from China and India, was driving up prices of products derived from crude oil, such as gasoline and heating oil.
U. S. refiners responded to soaring gasoline prices, churning out gasoline at unprecedented rates. But in part because refineries here are configured to make more gasoline, they made diesel less of a priority. "Refiners maximized gasoline production," says Mary Rose Brown, a spokeswoman for Valero Energy Corp. , the nation's largest refiner.
As a result, U. S. retail diesel prices soared to a high of $3. 16 a gallon for the week ending Oct. 24, weeks after the storms hit, even while gasoline was fall¬ing from a high of $3. 07 for the week ending Sept. 5.
There isn't much help coming from overseas. European refiners also are struggling to make more diesel fuel, be¬cause Europe uses more diesel than it produces. So while gasoline imports surged to 1. 54 million barrels a day dur¬ing the week ending Oct. 14, more than 50% higher than normal, imports of low-sulfur diesel have shown little growth.
Diesel demand is high in Europe in part because automobiles there increas¬ingly run on the fuel. In China, demand has been high because electric-power shortages led manufacturers to run their plants on diesel-powered generators. Even in the U. S. , demand for diesel is rising faster than demand for gasoline. Analysts say such trends could be par¬ticularly troublesome next year, when U. S. environmental regulations requiring lower sulfur content in diesel could fur¬ther crimp supplies. U. S. refiners fear that the new low-sulphur diesel could be contaminated by sulphur residue in the pipelines during transport, potentially forcing them to re-refine the fuel.
